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Saturday, October 4, 2008

The Beginning of the US Solar Boom?

Its been a big solar news week, but no news was bigger than the $18 billion package for renewable energy that was slipped into the $700 billion Wall Street financial bailout (H.R. 1424, the Emergency Economic Stabilization Act of 2008) and that that was finally passed by the U.S. Congress on Friday (Oct 4) and promptly signed into law by President Bush. Solar emerged the big winner, with the Green Wombat identifying some of the goodies the solar sector will have in store:

"The 30% solar investment tax credit [ITC] has been extended to 2016, giving solar startups, utilities and financiers the certainty they need for the years’ long slog it takes to get large-scale power plants and other projects online. The extension is particularly important to those Big Solar projects that need to arrange project financing in the next year or so.

The $2,000 tax credit limit for residential solar systems has been lifted, meaning that homeowners can get a 30% tax credit on the solar panels they install after Dec. 31. That will save a bundle - especially for those who live in states with generous state rebates - and goose demand for solar panel makers and installers like SunPower and First Solar. (If you buy a $24,000 3-kilowatt solar array in California - big enough to power the average home - you can claim a $7,200 federal tax credit. Add in the state solar rebate and the cost of the system is cut in half.)

Utilities like PG&E, Southern California Edison and FPL can now themselves claim the 30% investment tax credit for large-scale solar power projects. That should encourage those well-capitalized utilities to build their own solar power plants rather than just sign power purchase agreements with startups like Ausra and BrightSource Energy."

The third point cannot be understated. That utilities can now themselves participate in the ITC should delight authors of the "Utility Solar Assessment (USA) Study: Reaching Ten Percent Solar by 2025" report, the primary theme of which is that utilities have to be the central driving force of the solar revolution (see previous post "Fed Up with Solar"). Its now seems that a more ideal balance of carrots (this new law) and sticks (the renewable portfolio standards in roughly half of the American states that oblige utilities to produce a fixed amount of renewable power by a fixed date) will create winning business propositions for managers of utilities to scale up solar projects.

Julia Hamm, executive director of the Solar Energy Power Association, was quoted in an official statement as saying:

U.S. electric utilities’ engagement with grid-connected solar electricity has increased significantly in 2008, with major photovoltaic and concentrating solar thermal project announcements totaling more than 5,000 megawatts...Without the ability to take direct advantage of the ITC, the only viable financial option was to have these plants be owned and operated by independent power producers who then in turn sell the electricity to the utility. The change to the tax credit facilitates utility ownership as another option, which will result in additional projects and innovations.

Ms. Hamm also noted that the ITC extension means that some of the largest planned projects in history, particularly PG&E's 550MW power purchase agreement with OptiSolar and 250MW PPA with SunPower, both of which were contingent on the extnsion of the ITC, could continue as planned.

With an eight year extension of the solar investment tax credits and a complete removal of the residential cap for homeowners investing in solar systems – our customers can now realize a full payback of their solar investment in five years instead of 10, delivering a 20 percent return on investment, which in today’s economy is the very best investment homeowners can make.

The obvious looming question is how the global credit crunch will affect the cleantech sector. And even if financing comes through, there are also land use issues that developers of large-scale solar farms will have to contend with, especially in proposed sites such as the Mojave desert which consitute habitat for protected wildlife (See the Green Wombat's article "The hottest tech job in America: Wildlife biologist"). Recognizing the potential land use conflict, the Environmental Protetion Agency has plotted a "Google Map" identifying 480,000 sites that have been previously marred by toxic wastes that could be ideal for various renewable energy projects, including solar (see picture above), because of their cheap land costs and existing infrastructure. Whether these are healthy environments for workers to operate is another issue.

Chinese solar giant Suntech is pinning its hopes on a vibrant U.S. solar market and has wasted no time making an aggressive push into the U.S. market by acquiring Californian solar integrator EI Solutions, launching a joint venture with solar financier MMA Renewable Ventures to develop and finance large scale (10MW and above) solar projects, and enlarging its U.S. dealer network. Suntech expects to triple its sales in the U.S. in 2009.

Across the Atlantic, Spanish solar policy was also recently in the spotlight. With certain solar incentives expiring at the end of September, the Spanish cabinet approved a higher cap for solar installations (500 MW for 2009 and 460 MW for 2010) and a lower reduction in the country's solar feed-in tariff (now 32 to 34 Euro cents) than originally feared. Although the sense is that the solar industry is satisfied with the compromise outcome considering the more draconian reductions in incentives earlier proposed, a noticeable scale-back in the Spanish solar market, till now one of the hottest, is inevitable.

Well I guess it would be great if that energy would be created by using natural stuff like pannels and stuff you know, and in that zones would great if they apply this, because the concentration of heat and light it's greater so I gues they can think about it.Thanks for sharing.

the solar coaster operator

Julian Wong is a Fulbright Scholar in Beijing, engaging in independent research on renewable energy policy and entrepreneurship in China. Until recently, Julian Wong was a corporate attorney in New York City and Hong Kong and a sitting member of the Energy Committee of the New York City Bar Association. He obtained a B.A. in Biology from Pomona College, M.A. in Environmental Policy from Duke University Nicholas School of the Environment, and J.D. from Duke Law School. He is also author of a blog on green initiatives in China called The Green Leap Forward at www.greenleapforward.com